USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 138

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The WallMal Company has entered into a four-year interest rate swap, with semiannual settlement, to pay a fixed rate of 8 percent per year and receive six-month LIBOR. The notional principal is $50,000,000.
-Refer to Exhibit 15.19. Assume that one year after the swap was initiated the fixed rate on a new three-year receive fixed pay floating LIBOR swap has risen to 9 percent per year, calculate the market value of the 8 percent fixed rate bond based on $100 face value. Settlement is on a semiannual basis.

• A) $76.45
• B) $101.24
• C) $100.0
• D) $97.42
• E) $70.77

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Definitions:

Retirement Fund

Financial resources that have been saved and are used to support a person's retirement.

Mutual Fund

An investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments.

Compounded Monthly

The method of determining interest that includes both the original principal sum and the interest that has previously been added up over past months.

Invest

Allocating resources, usually money, in the expectation of generating an income or profit.